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Abstract

Calendar anomalies, specifically Day of the Week (DoW) effect, have attracted considerable attention by academicians and practitioners during the last decades. This study investigates the existence of DoW effect in 13 emerging stock markets by utilizing an observation period of 12 years. Whereas the findings of the study reveal the presence of negative Monday effects for Indonesia, Malaysia, and Thailand; positive Monday returns are found in South Africa contrary to expectations. Furthermore; positive Friday returns are observed in 9 of the markets belonging to Argentina, Brazil, Bulgaria, Indonesia, Malaysia, Romania, Thailand, Tunisia, and Turkey. Additional results document the presence of positive Wednesday and Thursday returns for most of the markets analyzed.

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2. Literature Review

Due to the existence of vast amount of studies with respect to market anomalies concerning the relationship between week days and stock returns, this study mainly focuses on recent ones conducted in emerging markets making up the sample of the below empirical analysis. Even though DoW effect has been found out to exist in various security exchanges, the findings differ as to the significance of the returns on trading days. Basher and Sadorsky (2006) use different models to evaluate the existence of DoW effect on 21 emerging stock markets during the period between December 1992 and October 2003. The controversial results document that even though majority of the markets do not demonstrate the evidence of all week days on market returns, the countries; namely, Philippines, Pakistan, and Taiwan show this anomaly for certain days of the week in all 5 models performed. Furthermore, negative Monday and positive Friday effects are demonstrated for Turkey providing results in favor of the traditional weekend effect. Another cross country study that focuses on East Asian financial markets during the period between January 1998 and October 2003 documents the presence of DoW effect on most of the selected markets. Some of the findings indicate negative Monday returns for China, Indonesia, Malaysia, Japan, Singapore, South Korea and Thailand. Additionally, whereas highest Friday returns are demonstrated by Singapore and Thailand; highest Wednesday returns are demonstrated by China, Malaysia, South Korea and Taiwan (Ndu, 2005). Similar findings are revealed by Chandra (2006) with Singapore and Thailand showing positive and negative returns for Friday and Monday, respectively. Choudhary and Choudhary (2008) provide evidence on 20 developed and emerging markets in that 18 of those markets exhibit highest returns on any trading day other than Monday. Contrarily, highest positive returns are detected on Monday for India and Austria.

Some of the studies that focus on the Chinese stock market are performed by Lai et al. (2012), Qiao et al. (2011), Cai et al. (2006) and Chen et al. (2001). During the period between December 1995 and December 2010, Lai et al. (2012) concludes on the existence of a significant negative Thursday effect on the Shenzen stock market. The concurrent study of Qiao et al. (2011) conducted for the January 1994 and December 2008 period reports only Wednesday effects in Chinese markets with Wednesday stochastically dominating Thursday and Monday for A-share and B-share stock markets, respectively. Different findings are provided by Cai et al. (2006) for the ten year period between 1992 and 2002 showing negative daily returns only for Tuesday for the A and B-shares in Chinese stock markets.